Money Matters: Belton City Council

In an intense and somewhat heated workshop, the Belton City Council discussed the city’s ad valorem (property) tax rate one last time before bringing it to vote during the regularly scheduled meeting on Tuesday, August 11th.

The largest considerations before the council in terms of budget were funding the capital equipment replacement plan and the street maintenance plan, neither of which are fully funded in the proposed 2016 budget. The capital equipment plan would come at a cost of approximately $380,851 dollars for the 2016 budget year, while the street plan would cost about $529,645 in the upcoming year, for a total cost need of $910,496.

Both of these plans would create a long-term, rotating replacement schedule to avoid high-cost, last-minute scrambles to replace inoperable streets and equipment by creating a sustainable schedule for replacement with relatively constant funding requirements.

Capital equipment encompasses items such as police and public works vehicles, as well as public works equipment, all of which are necessary to maintain a high quality of life in Belton. However, many of these vehicles, particularly within the Public Works Department, are nearing the end of their lifespan. While most of these vehicles will remain functional this year (with several trips to the repair shop), the issue arises when the city is forced to purchase several vehicles within one fiscal year, creating a significant burden on finances all at once.

On the street side, a study was performed nearly two years ago to outline which streets necessitated work and when. This study would allow the Public Works Department to maintain, repair and replace city streets based on an outside assessment, creating a fair system for determining which streets received the most care. However, the actual application of this study has not been funded by council, so the department has been forced to simply maintain the current state of most streets with only minor improvements.

With these things in mind, City Finance Director Brandon Bozon brought a plan to the council that presented the financial realities of implementing both of the plans and laid out all the possible funding options of such an endeavor. Full funding for the capital equipment replacement plan could come from a 4.65 cent increase in property taxes, or the street maintenance plan funding could come by way of raising property taxes 6.47 cents.

However, funding both would raise taxes 11.12 cents, a huge jump for taxpayers. In addition, no consideration was given to increasing the tax rate beyond the rollback rate, which would amount to 2.6 cents this year. As such, simply raising taxes is an unrealistic funding source.

So, Bozon presented the council with additional funding options, including using funds from the tax increment reinvestment zone (TIRZ), which encompasses certain areas of the city. This option could only be used for street maintenance and only within the designated areas. However, using these funds would reduce the unfunded cost of the plan to $318,374 per year from the $529,645 earlier discussed.

Bozon also presented a street maintenance fee as an alternative to tax increases. A $1 per month fee would generate about $60,000 per year, so city staff discussed a $4 per month fee, generating $240,000 for the 2016 budget. However, this still does not address capital equipment.

Of the current rate of 65.98 cents, 12.66 cents is dedicated to debt service and 53.32 cents is put toward operations and maintenance (O&M). Maintaining this rate would generate just over $6.2 million, about $6 million of which would be collected. Increasing the city’s property tax 2.6 cents would generate approximately $238,000 more than continuing with the current rate.

Due to increasing water and sewer costs, however, the majority of councilmembers were reluctant to raise taxes or implement new fees.

Mayor pro tem David K. Leigh was particularly against implementing either plan this year due to funding issues.

“What is being requested is not realistic,” mayor pro tem David K. Leigh said. “Do we really need this dump truck? Do we really need to repair that street? I think that the request in front of us is not achievable this year. We’re not going to solve it this year.”

Most other councilmembers disagreed with Leigh, believing that both plans were necessary. However, funding still remained a problem for them.

“You asked them to go out and identify the needs. They’ve had a maintenance study done for streets. We’ve put that off for 10 years, but we’ve got it now. We’ve had it for almost two years. They’ve identified that, and they’ve identified the needs of the fleet. It’s just whether or not y’all want to fund it,” city attorney John Messer said.

Council member Guy O’Banion agreed.

“We’re making a decision to stop the bleeding in these two areas and come up with a sustainable—much as I hate the word—plan to keep that from biting us down the road to where there won’t be any big ups and downs in the budget. That’s how my business works—we rotate our equipment. You don’t just hang on to 20-year-old equipment because that’s bad business. It’s just a matter, to me, of how to fund it, and if there’s a way to do it without tax increase, then I’m okay with that.”

Despite a general rejection of a tax increase from her fellow council members, Jerri Gauntt saw the increase as inevitable and advocated heavily for the need to implement both the street maintenance and capital equipment replacement plans.

“I was on the other side of the fence eight years ago as a staff member, and I know that staff has been living pretty lean for a really long time. We have put off, skipped, whatever, regular maintenance, regular repair, regular replacement of all kinds of things or we wouldn’t have 30-year-old dump trucks right now that have wheels coming off of them,” councilmember Jerri Gauntt said. “We put Band-Aids on a lot of things for a long time, and we negotiated our way out of a lot of places. I’ve been seeing for eight years that this day was coming, and it’s ugly. We’re paying for the sins of putting that off, and we have to pony up now. I hate to do it, but it’s got to be done.”

Mayor Marion Grayson favored dipping into the General Fund balance to help pay for the plans. The fund currently has about $4.7 million. The majority of that money, $3 million, will remain in the balance as an emergency fund; that is enough money to allow the city to continue operations for three months without revenue. Although this is not a mandate, council members agreed that this was good business practice. The remaining $1.7 million, however, can be used for whatever the council deems fit.

“I was elected, over the last 10 years, to take care of the citizens’ needs,” Mayor Marion Grayson said. “We have a fund balance of $1.7 million—which is the citizens’ tax dollars—that we’re holding onto. I don’t think any taxpayer would have a problem with us going a little bit into the projected fund balance to do the last little bit of what we need to do to get ready for our coming year. Then, we need to be really diligent about what we do for the next budget cycle.

In an effort to not rely too heavily on a one-time funding solution rather than a sustainable funding source, O’Banion suggested committing to both plans this year and striving toward a better financial source next year.

“But I think if you don’t address the problem, then you’re kicking the problem down the road,” O’Banion continued.

A partial solution came in the form of the Belton Economic Development Corporation, but further discussion will be held at a later date. Leigh also suggested a small tax increase to help ease into a solution within the coming years.

However, when it came time to vote on the tax rate during the council meeting later in the evening, the council voted 5-1 with one abstention to set the proposed tax rate the same as the current rate of 65.98 cents. Two public hearings will be held on the rate: Aug. 25 and Sept. 8. Both will take place at 5:30 in the Harris Community Center, 401 N. Alexander. The tax rate will be adopted Sept. 22.